Can an old firm learn new tricks? - A corporate entrepreneurship approach to organizational renewal
Publication Year: 2012
Journal: Business Horizons
Corporate entrepreneurship (CE) strategies are widely recommended for established firms to solve growth- and economic performance-related problems that they encounter in highly competitive business environments. However, relatively little empirical light has been shed on practical CE strategy processes and how they function in the everyday lives of organizations. The case study presented herein addresses this underexplored issue by describing how one long-established firm in dire economic circumstances renewed its strategy, as related by an interview with the company’s managing director. The analysis draws on the theoretical ideas of corpo- rate entrepreneurship models and focuses on practical activities within the strategic renewal process: What did the case firm actually do to compensate for decreasing turnover and to improve its longer-term position in the market? The findings under- score the progressive, proactive, and impermanent nature of CE strategies; further, they suggest that firms need clients and other external partners with equally ambi- tious business objectives in order to successfully implement their CE strategies.
This case study describes how one long-established firm in dire economic circumstances renewed its strategy, as related by an interview with the company’s managing director. For the literature review the changes made by the company will be compared to the different phases of the adaptive cycle (AC). The case study focuses on; What did the case firm actually do to compensate for decreasing turnover and to improve its longer-term position in the market? For the reflection it will me more interesting to see how, when en why they made the choices.
The company is a Finnish business-to-business marketing services firm with a long history in the domain; AdChance (a pseudonym).
For this case study the senior perspective is chosen. Although CE can and should also be viewed from different perspectives; the middle and lower levels of a firm to play important roles in CE strategy implementation.
The elements of the adaptive cycle come forward in several statements made in the paper;
Page 44; Entrepreneurial attitudes and behaviors are necessary for firms of all sizes to prosper and flourish in competitive environments.’’ Page 44; Corporate entrepreneurship (CE) is a potential sur- vival strategy for firms that operate in highly com- petitive business environments. Ireland and Webb (2007) specify the role of opportunities in CE strategies by articulating that firms should balance the exploitation of existing opportunities for present success with the exploration of new opportunities for future competitive purposes. Phase 1 – Crises – The loss of a big client The renewal problem took place direct after an external shock resulted in an urgent need to redefine strategic choices. The company had already thought about new strategies but there was no urge till this point. Here it can be stated that the company ends up in the crisis phase of the AC. The crises might be foreseen or decreased when a new strategy was implemented earlier. Since the company was depending on a big client, huge changes needed to occur after the client left. Then the company ended up in the crises phase; in the need to seek for new combinations for (corporate) entrepreneurship.
Phase 2 – New combinations – Creating a pro-entrepreneurship organizational architecture The loss of the big client resulted in the gathering of the management team and they begun contemplating about the future of the company. The company’s’ everyday practices did not normally involve deliberations or discussions about the future; the scope was seldom extended beyond 6 months. Facing serious problems, including reduction of staff, they had to anticipate several years into the future. Here it is clear stated that the crises had to come before action was taken. The reduction of staff forced the management team to come up with a new strategy looking further than 6 months. In the management team discussions it came forward that the agency was manly in the business of fulfilling briefs. Clients gave briefs and the agency worked according to those. So, if the briefs became smaller, the agency would become smaller as well. The realization came; that probably wasn’t the way to add value. The agency decided – in the future they would not wait for briefs; they needed to create their own. New combinations; proactive measures will produce value for both AdChance and its clients. ‘producing results for the clients.’
Phase 3 – Entrepreneurship - Acquiring the first new client entrepreneurially The management group decided to reorganize employee roles on the grounds of this new focus in activities. The study states that the shift from production to planning and design required an architecture that systematized throughout the agency the search for and execution of work opportunities. Employees were given more and different responsibilities; they were expected to behave according to these responsibilities without executives’ involvement and control. The entrepreneurship part is well shown in the fact that the found strategy needed engagement of all employees to carry it out to the clients. AdChance set out to acquire new clients that would suit the firm’s new competitive advantage and help leverage it.
4 – Equilibrium – Enjoying the results AdChance’s new strategy, with its clear focus on measurable results and its implementation, generated positive outcomes for both the client and the firm itself! In the end the seeking to new opportunities, and implementing them – using entrepreneurship – led to a success for AdChance.
Concluding remarks The different phases of the adaptive cycle are well shown in this paper, starting in the crises phase. Corporate entrepreneurship is an interesting way how a company can evolve from a crisis to a new equilibrium. It can be stated that the company’s future perspective (further than 6 months) needs to be discussed and adapted in order to keep the crisis as small as possible.